Contract of Al-Hewalah

Al-Hewalah means to move. The term is typically used where the debtor moves his debt to a third party. For Al-Hewalah to take place, there are two necessary steps that must take place:

  1. The third party (“C”) will become indebted to the creditor (“A”) for the original debt under the same terms and conditions, as well as the amount, or the original debt between A and the original debtor (“B”).
  2. A new debt will be created, whereby B will be indebted to C, for consideration similar in value to that of the original debt.

Al-Hewalah has been used by the Jewish scholars extensively to get around ribaa. The Muslim scholars, however, have clearly laid down the requirement for the original and the new debt to be of similar value. This difference between the Muslim scholars and the Jewish scholars stems from different core methodologies; the Muslim scholars emphasize the spirit of the law, whereas the Jewish scholars emphasize the letter of the law.

The Hewalah contract cannot take place unless all three parties agree to the arrangement.

Source: Abdelhaleem, 13. 

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2 Comments

Filed under Contracts and Transactions

2 responses to “Contract of Al-Hewalah

  1. This article is really helpful for getting a general knowledge about Islamic Economics. However, you can read this one for more information about;

    http://islam-economy.org/islamic-economics/consumption/

  2. thanks for the post.. hope you guys is going to have a chance to study in Turkey.

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